Inheritance Tax Act 1984 section 46B

Contract of life insurance entered into before 22nd March 2006 which immediately before that day is property to which section 71 applies

Section 46B protects life insurance policies held within accumulation and maintenance trusts that were set up before 22 March 2006, ensuring that ongoing premium payments and certain contract variations after that date do not trigger unexpected inheritance tax charges.

• Where a life insurance contract was entered into before 22 March 2006 and held in a pre-existing accumulation and maintenance trust under section 71, rights arising from premium payments or allowed variations after that date continue to be treated as section 71 settled property, even though new property would not normally qualify after the 2006 rule changes.
• The protection also extends where the trust property has transitioned from section 71 status into a trust for bereaved minors (section 71A) or an age 18-to-25 trust (section 71D), provided the transition occurred in the correct sequence directly from section 71 status without the property leaving the settlement.
• If the payment of a life insurance premium constitutes a transfer of value made by an individual, that transfer is treated as a potentially exempt transfer rather than an immediately chargeable transfer, meaning no inheritance tax will arise provided the individual survives for seven years.
• An "allowed variation" is narrowly defined as a variation that occurs by operation of, or through the exercise of rights conferred by, provisions that were already part of the contract immediately before 22 March 2006 — new variations adding benefits or extending the term outside these original provisions would not qualify.

---